Sterling struggles as UK faces weak data
Sterling faces ongoing pressure amid disappointing UK economic data, while China’s growth outlook is threatened by US tariffs, with both economies navigating uncertain futures.

Sterling weakens following disappointing UK economic data.
December retail sales fell 0.3%, missing expectations.
China hits 5% GDP target, but US tariffs pose ongoing risks.
Sterling faces pressure amid weak economic data
Sterling remains under pressure following a disappointing week for UK economic data, underscored by December’s lackluster retail sales. Volumes fell 0.3% month-on-month, sharply missing the expected 0.4% gain, completing a trio of negative reports, which also included weaker-than-expected GDP growth and inflation figures. This data has fueled expectations that the Bank of England (BoE) may ease monetary policy in 2025, but markets now pricing in two 25bps rate cuts for the year.
However, the BoE faces a delicate balancing act. Despite weak growth and the ongoing challenges posed by the government’s Autumn Budget measures, core inflation remains stubbornly high at 3.2%. This persistent inflationary pressure limits the central bank’s flexibility to deliver more aggressive policy easing. The hesitation to signal a clear path forward risks undermining business confidence, potentially weighing on the UK’s broader economic sentiment, even psychologically.
China meets 5% GDP target, but US tariffs pose ongoing risks
China’s economy exceeded expectations in 2024, with a late policy blitz and a surge in exports helping the country hit its 5% GDP growth target. However, as the market shifts focus to potential new risks, the trade front looms large. Tariffs imposed by the US remain a significant threat to growth, and while China’s policymakers are better prepared than in previous years, the economy’s vulnerability persists. Despite reducing reliance on US exports, the confidence in China’s economy has plunged, raising concerns about potential capital outflows if sentiment deteriorates further.
The yuan, already under pressure, is expected to weaken more, as investors brace for lower government bond yields and a subdued stock market. Analysts also warn that the stimulus measures, though timely, were insufficient to meaningfully boost corporate profits, leading to expectations of a lackluster earnings season ahead.
In Hong Kong, Chinese stocks had their best week in over three months, but investor sentiment remains fragile. The ongoing volatility in the property sector, exemplified by companies like China Vanke, continues to cloud the outlook. Reports of uncertainty surrounding the company’s leadership following local news of potential government intervention have only added to the unease.